Tesla posts loss but says Model 3 rollout still on track

Elon Musk, the co-founder and chief executive of electric carmaker Tesla, gestures during a ceremony in Dubai on February 13, 2017. The company said Tuesday that it built 50,067 cars in the second half of 2016 and delivered 47,073, whereas it had projected delivering 50,000 cars during that timeframe. less

Elon Musk, the co-founder and chief executive of electric carmaker Tesla, gestures during a ceremony in Dubai on February 13, 2017. The company said Tuesday that it built 50,067 cars in the second half of 2016 ... more

Photo: KARIM SAHIB, AFP/Getty Images

Photo: KARIM SAHIB, AFP/Getty Images

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Elon Musk, the co-founder and chief executive of electric carmaker Tesla, gestures during a ceremony in Dubai on February 13, 2017. The company said Tuesday that it built 50,067 cars in the second half of 2016 and delivered 47,073, whereas it had projected delivering 50,000 cars during that timeframe. less

Elon Musk, the co-founder and chief executive of electric carmaker Tesla, gestures during a ceremony in Dubai on February 13, 2017. The company said Tuesday that it built 50,067 cars in the second half of 2016 ... more

Photo: KARIM SAHIB, AFP/Getty Images

Tesla posts loss but says Model 3 rollout still on track

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Tesla reported Wednesday that it built and delivered fewer vehicles in the last three months of 2016 than in the previous quarter, while posting a $121.3 million loss.

At the same time, however, the Palo Alto electric-car maker reassured investors that the long-awaited rollout of its next car — the $35,000 Model 3 — remains on track. Limited production should begin in July and reach 5,000 cars per week by year’s end, according to a letter Tesla sent to shareholders.

“I think it’ll be a very compelling car, but it’s a simpler design, and we certainly understand manufacturing better than we did in the past,” CEO Elon Musk told Wall Street analysts on a conference call Wednesday.

The car, he noted, lacks some of the features that proved problematic on the company’s earlier models, such as the falcon-wing doors on the Model X SUV. It will have regular door handles instead of the ones, used on both the Model X and the Model S sedan, that lie flat against the door until needed.

Tesla Motors faces several major challenges in 2017 that will determine the automaker's success in the coming years. The automaker plans to release the Model 3 vehicle, which will be priced at $35,00, making it one of Tesla's most affordable models. The car maker also plans to launch Solar Roof tiles, an alternative to traditional rooftop shingles, as part of the company's joint venture with Solar City. Tesla also intends to open new charging stations for its electric automobiles. By the end of 2017, the firm hopes to double its charging presence.

Tesla also reported that its integration of Musk’s solar leasing company, SolarCity, is well under way. Tesla’s purchase of SolarCity closed six weeks before the end of the fourth quarter.

While Tesla is still building out its massive battery Gigafactory near Reno, the company said Wednesday that it plans to pick locations this year for two more Gigafactories, possibly three.

And Musk announced that the company’s chief financial officer since 2015, Jason Wheeler, would leave in April to take a job in public policy.

Neither Musk nor Wheeler, speaking with analysts, would say precisely where Wheeler would go, although Wheeler said his new pursuit would “scratch an itch” that he had felt for a long time. He will be replaced by Tesla’s former longtime CFO, Deepak Ahuja.

Tesla’s future, not to mention its sky-high stock price, depend on the Model 3, the company’s first car designed for middle-class drivers. Since the start of the year, Tesla’s stock has surged 27 percent to hit $273.51 per share.

That rally “is based on hopes and dreams that production for the Model 3 does well,” said Bill Selesky, senior analyst with Argus Research. “This is the one they’re hoping catches on with the mass American public. There’s a lot at stake here.”

Musk said Wednesday that the first Model 3 cars will go to Tesla employees.

“If there are any issues or bugs that need to be addressed, we can address those before customers see the final version,” he said.

While Tesla has already started installing manufacturing equipment for the Model 3 at its Fremont plant and its Nevada Gigafactory, it is also trying to expand production of its two existing models, the Model S and Model X. And yet, production dipped 1.2 percent in the fourth quarter of 2016, with the company building 24,882 cars.

Tesla attributed the slowdown to the complexity of equipping all its new cars with the hardware that will be needed to drive themselves, even though fully autonomous driving remains years away. Tesla started adding more cameras and sensors to all its cars in October.

As a result, the company built 50,067 cars in the year’s second half and delivered 47,073. Tesla had projected delivering 50,000.

For the entire year, Tesla built 83,922 cars, a 64 percent jump from the previous year’s total of 51,095. Tesla plans to expand annual production to 500,000 cars in 2018 and a million vehicles in 2020, and Musk on Wednesday said both targets remain in reach.

The quarterly loss of 78 cents per share, or 69 cents once non-recurring items have been excluded, may have come as a disappointment to investors after Tesla, in the third quarter, scored the second profit in its brief history. Analysts had predicted a loss of 43 cents, excluding one-time items.

For the year, Tesla posted a loss of $674.9 million ($4.68 per share), down 24 percent from $888.7 million in 2015.

Revenue surged from $4 billion in 2015 to $7 billion last year.

Musk also pushed back against a blog post this month from a Tesla production worker complaining about working conditions and pay at the Fremont plant. The worker, Jose Moran, argued that workers should join a union to address their concerns, and the United Automobile Workers Union has acknowledged trying to organize Tesla’s employees.

Musk said Wednesday that Tesla’s injury rate over the last two months had been half the industry standard, and that when stock options are factored in, the company’s employees are better compensated than their peers.

“There was an allegation that people are the lowest paid at Tesla,” he said. “In fact they’re the highest paid if you include the equity, which you should.”